RUSSIA

R ussia’s economic freedom score is 61.5, making its economy the

92nd freest in the 2021 Index. Its overall score has increased by 0.5
point, primarily because of an improvement in the tax burden score.
Russia is ranked 42nd among 45 countries in the Europe region, and its
WORLD RANK: REGIONAL RANK: overall score is below the regional and world averages.

92 42 Russia’s economy is ranked moderately free for the second year in a row
after more than a decade in the mostly unfree category. Until the rule of
ECONOMIC FREEDOM STATUS: law is strengthened considerably, the investment code is liberalized, and
MODERATELY FREE government pursuit of corrupting statist and protectionist economic pol-
icies ceases, however, further expansion of economic freedom in Russia
will be difficult.

IMPACT OF COVID-19: As of December 1, 2020, 40,050 deaths had been

attributed to the pandemic in Russia, and the economy was forecast to
contract by 4.1 percent for the year.

ECONOMIC FREEDOM SCORE

61.5 ▲ UP 0.5 POINT

0 50 60 70 80 100


REGIONAL
WORLD
AVERAGE 61.6 70.1 AVERAGE
(EUROPE REGION)

HISTORICAL INDEX SCORE CHANGE (SINCE 1995): +10.4

RECENT FREEDOM TREND QUICK FACTS

70

POPULATION: UNEMPLOYMENT:
61.0 61.5
144.4 million 4.6%
58.2 58.9
60 57.1 GDP (PPP): INFLATION (CPI):
$4.4 trillion 4.5%
1.3% growth in 2019
FDI INFLOW:
50 5-year compound
$31.7 billion
annual growth 0.8%
$29,181 per capita PUBLIC DEBT:
14.0% of GDP
40

2017 2018 2019 2020 2021 2019 data unless otherwise noted. Data compiled as of September 2020

BACKGROUND: Vladimir Putin was reelected president in 2018 amid allegations of electoral fraud. Russia
illegally annexed Ukraine’s Crimean Peninsula early in 2014 and continues to foment instability by sup-
plying weapons and troops in eastern Ukraine’s Donbas region. Ongoing Western economic sanctions
have led to a brain drain and capital flight. Russia’s economy depends heavily on exports of oil and gas. In
recent years, low oil prices, the financial burden of the Crimea annexation, and efforts to rearm the military
have strained public finances. Because of its actions in Ukraine, Russia’s bid to join the Organisation for
Economic Co-operation and Development has been postponed indefinitely.

348 2021 Index of Economic Freedom

 WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES

12 ECONOMIC FREEDOMS | RUSSIA

RULE OF LAW GOVERNMENT SIZE
(–2.4) (–2.0) (+0.4) (+4.5) (+2.3) (+0.9)

100 100

80 80

70 70

60 60

50 50

54.4 42.4 41.7 93.0 66.1 99.6

0 0
Property Judicial Government Tax Government Fiscal
Rights Effectiveness Integrity Burden Spending Health

The Russian constitution recognizes property rights. The state
owns the majority of land, but most structures are privately
owned. The rule of law is not maintained consistently. Courts
lack independence, face heavy political pressure, and are
biased in favor of conviction. Corruption is pervasive in the
highly centralized and authoritarian government and the
cronyism-tolerant business world. A lack of accountability
enables bureaucrats to act with impunity.
The individual income tax rate is a flat 13 percent, and the top
corporate tax rate is 20 percent. Other taxes include excise
and value-added taxes. The overall tax burden equals 11.4
percent of total domestic income. Government spending has
amounted to 33.6 percent of total output (GDP) over the past
three years, and budget surpluses have averaged 1.1 percent
of GDP. Public debt is equivalent to 14.0 percent of GDP.


REGULATORY EFFICIENCY OPEN MARKETS
(+3.9) (+3.3) (–0.9) (–3.8) (No change) (No change)

100 100

80 80

70 70

60 60

50 50

84.1 55.4 67.3 74.0 30.0 30.0

0 0
Business Labor Monetary Trade Investment Financial
Freedom Freedom Freedom Freedom Freedom Freedom

Improvements in the bureaucracy of the utilities in Moscow
and St. Petersburg have made obtaining electricity less
time-consuming. Starting a business is less costly, and dealing
with construction permits now takes less time. The labor
market is fragmented with low labor mobility but highly
flexible wage rates. According to the World Bank, subsidies
and transfers consume nearly 70 percent of the govern-
ment’s budget.
Russia has 11 preferential trade agreements in force. The
trade-weighted average tariff rate is 5.5 percent, and
227 nontariff measures are in effect. Private-sector trade
and investment activities are undercut by structural and
institutional constraints caused by state interference in the
marketplace. Foreign investment is screened, and investment
in several sectors of the economy is capped. The financial
sector is subject to government influence.

The Heritage Foundation | heritage.org/Index 349